June 12, 2013

Targeting Today

EDITORIAL NOTE: This edition of the Market Structure Map ran nearly a year ago, on May 30, 2012, right ahead of the NIRI National Conference, the IR profession’s annual gathering. We’re at NIRI again now, in sultry south Florida with our professional compatriots conferencing at the Westin Diplomat in Hollywood.  After spending several hours at the ModernIR booth, this still seems apropos. Catch you next week.  -TQ 

“So we should target value investors next week.”

Those eight words say much about IR today. I heard them on a weekly web meeting with a Nasdaq-traded company whose name most everybody knows. The point isn’t who said it. The idea applies to all of us. More in a moment.

First, at NIRI National next week I’m a panelist Monday along with Jason Lenzo, Director of Equity and Fixed-Income Trading at Russell Investments. Russell indices benchmark tomorrow for rebalancing, by the way. Our panel hits market structure and how it affects institutional trading and IR targeting today. Come ask tough questions.

Back to those words. There’s an action in them: Target. An audience: Value investors. A timeframe: Next week.

The kicker: This company is a growth story. What’s wrong with growth stories right now? Well, consider the environment. Yesterday, markets were briefly rattled by the Conference Board’s consumer confidence survey, which dipped more than expected. US stocks were up anyway, but not on growth. Money saw Chinese stimulus, Swiss capital controls to keep the franc from climbing, and rising yields on Spanish and Italian bonds as reasons to buy short-term shelters. US stocks.

Growth stocks, or value stocks?

Exactly.

Next week the situation might be wholly different. A growth story might indeed be a growth stock. Or a GARP stock. Stock and story are not the same, any more than summer and winter clothing at your favorite retailer are hot items simultaneously. Sure, it’s all clothing. But context matters. Got a tough environment? Inventory to move? You’re a value story.

How do you know you’re a value, growth or GARP stock – as opposed to story? Market structure. Studying ownership isn’t going to tell you. That data won’t keep up with fads, let alone seasons. And settlement data has no personality, no time horizon.

Sure, you can continue selling coats year-round. “We don’t worry about the stock, we just tell a good story.” Good luck selling those parkas in Jackson, Mississippi, in June.

Now, does your CFO get this modern concept? If not, you have an exhilarating challenge ahead.

You’ll need something to back you up: Data. If no tool in your IR arsenal tells you the consumer sentiment in your shares – whether you’re winter coats or swimsuits – then your toolbox is rotary dial on a smartphone planet. Time for an upgrade.

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